Investing is becoming more important than ever. The American Association of Retired Persons (AARP) reports that the trust funds which supply many citizens with retirement and disability benefits will be depleted as early as 2035. This means that social security will only be able to pay out what it takes in through taxes on a yearly basis – and where is the security in that?
Thus many American citizens are turning to personal investments to secure better financials for postretirement life. With the advent of robo-advisors, this quest is made easier and more accessible than ever. Robo-advisors, while great in some respects, tend to facilitate the purchase of common stocks or mutual funds. Real estate – one of the best long-term investment options – is routinely forgotten.
The problem with real estate investment, in our estimation at least, is a matter of skewed perception. “Real estate” – the phrase itself conjures up images and situations the tepid investor would altogether avoid: the hassle of buying and selling homes, being a landlord, or renting out a room. But the fact is, investing in real estate can be just as passive as all the rest.
Some robo-advisors offer options for investing in real estate investment trusts (REITs). Others, like M1 Finance, support real estate investment by exposing users to bond and real estate investment ETFs.
Nevertheless, there are more definitive ways for the individual investor to passively involve themselves in real estate. Investing platforms like AcreTrader and CrowdStreet, both “crowdfunded” ventures, give one the sense of being connected and involved with the commercial properties they invest in. While functioning like robo-advisors, these services specialize in bona fide real estate investment.
Retirement and Real Estate – What Gives?
The benefits of investing in real estate are many. Often cited are predictable cash flows, moderate returns, tax advantages, and perhaps most paramount: portfolio diversification.
Let’s consider “predictable cash flow” – while real estate does not have the exciting boom or bust profile of an asset such as crypto currency, its perfectly suited for a long-term portfolio built for retirement. Real estate cash flow is predicated on rental fees, property appreciation, and profits generated by businesses renting the land or facilities.
In short, real estate is less abstract than stock picks, the value of the latter dependent on a world market that responds not to rhyme or reason (seemingly) but a kind of abstract sentiment.
Investing – Consequences Considered
There’s much talk of “ethical investing” these days, and not without good reason. Rather than concentrating on pure, unadulterated profit, investors, more than ever before, are filtering their choices through a personal environmental ethos.
And investing in real estate can align with just such a progressive attitude. For example, AcreTrader improves agriculture by implementing innovative farming practices, improving existing technologies on farms they are associated with, and deepening the commitment to sustainability. By investing in farmland through AcreTrader, one is directly investing in the future welfare of the earth.
Likewise, platforms like CrowdStreet do their part by democratizing real estate. By helping investors diversify outside of public equities, these services facilitate a power shift away from Wall Street and towards the individual.